Binance in the crosshairs: Are regulators paying attention to crypto?

Is Binance crypto’s new whipping boy? Regulators in the United States, the United Kingdom, Canada, Japan, Thailand and the Cayman Islands have all recently issued warnings and even criminal complaints against the cryptocurrency exchange. Even Poland entered the fray as its financial regulator warned citizens to exert “special caution” when using Binance’s trading services.

Some have opined that the firm has only itself to blame for this recent burst of regulatory heat, but others fear the exchange is being held as a scapegoat for the entire crypto sector — which has grown too large too fast in the eyes of some authorities. Elsewhere, Binance CEO Changpeng Zhao, known as CZ, felt compelled to address the “recent hyper-focus on regulation when it comes to Binance” in a public letter.

Binance — founded in Shanghai in 2017 but with no publicly acknowledged headquarters at present — has never been a poster child for compliance. “Binance has a history of attempting to avoid regulation while also making false statements about being regulated in some of these jurisdictions,” Dan Awrey, professor of law at Cornell Law School, told Cointelegraph, adding, “Binance has, therefore, placed the target firmly on its own back.”

Markus Hammer, an attorney and principal at Hammer Execution consulting firm, told Cointelegraph that regulators are just reiterating previous warnings, but now they are being noticed more broadly.

“Warnings usually are a preliminary to taking real actions,” like a ban on clients using a certain platform, explained Hammer. “The other reason might be that they are now trying to distance themselves, as investors are preparing to bring legal action over Binance Leveraged Tokens (BLVTs),” which he described as a “defective” financial product. He added, “A repeated warning that Binance is not regulated would free them from charges against having been blind or inactive before.”

Warnings alone can have consequences, however. When U.K. regulators warned in late June that Binance was operating without a business license, bank giant Barclays announced it would cease to facilitate customer payments to the exchange, with Santander following suit a few days later.

No widespread withdrawals

But maybe there is no need to overreact? “In spite of regulatory actions across jurisdictions, there is no mass exodus of tokens from Binance as happened in 2017 in connection with China’s previous onshore exchange crackdown,” Winston Ma, adjunct professor at New York University School of Law and author of The Digital War: How China’s Tech Power Shapes the Future of AI, Blockchain and Cyberspace, told Cointelegraph, adding:

“This shows that Binance has a global business and decentralized operation, and the market wasn’t too worried about the recent actions from those countries.”

Unregulated cryptocurrency exchanges like Binance have long been seen as off-ramps for money laundering and other criminal activities….